Chapter 3

Segmentation,
Targeting,
and Positioning
Mass-marketing
 A strategy that presumes there is one
undifferentiated market and that one
product will appeal to all consumers in that
market.
Advantages
 Lower cost

 One advertising campaign is needed

 One marketing strategy is developed

 Usually only one standardized product is

developed
Disadvantage
 It only works if all consumers have the same

needs, wants, desires, and the same

background, education and experience
Market matching strategy

 Today, mass marketing has largely been

replaced by a three-step market matching
strategy
Market Matching Strategy

Market Matching

Segmentation Targeting Positioning

Market Matching Strategy
 Segmentation
 Act of dissecting the marketplace into submarkets
that require different marketing mixes
 Targeting
 Process of reviewing market segments and deciding
which one(s) to pursue
 Positioning
 Establishing a differentiating image for a product or
service in relation to its competition
Market segmentation

 The process of dividing a market into distinct

subsets (segments) of consumers with
common needs or characteristics and
selecting one or more to target with a distinct
marketing mix
Segmentation Variables

Segmentation Variables

Geographic Geodemographic Behavioral

Demographic Psychographic
 Marketers may use a single variable
 Marketers may use two or more variables
Geographic Segmentation
 Division of the market based on the location of the
target market
 People living in the same area have similar needs
and wants that differ from those living in other areas
 Climate
 Population density
 Taste
 Micromarketing
Demographic Segmentation
 Partitioning of the market based on factors
such as
 age
 gender
 marital status
 income
 occupation
 education
 ethnicity
Age

 Product needs and interests often vary with

consumers’ age
Age Effects

 Occurrences due to chronological age

Cohort Effects

 Based on the idea that people hold onto the

interests they learned to appreciate growing
up
Gender

 Gender is frequently a distinguishing variable

 Changes in the family and growth of the dual-
income household have blurred some of the
lines
Marital Status
 Marketers have identified specific marital
status groups, such as:
1. Singles
2. Divorced individuals
3. Single parents
4. Dual-income married couples
 They then market products specifically
designed for one or more groups
Income, Education & Occupation
 These three variables are often related and
therefore often used together as a measure
of one’s social class.
 Income is commonly used because
marketers feel it is a strong indicator of ability
to pay for a particular product or service
 Income is often combined with other
variables to narrow target markets:
 With age to identify the important affluent elderly
 With age and occupation to produce the yuppie
segment
Race and Ethnicity
 The size and purchasing power of minorities
make them an attractive target market
 The size of the market is growing
dramatically relative to the “majority”
population
 Targeting certain products (e.g., alcohol,
tobacco) to such groups raises ethical issues
Tobacco and the African American
Community
 Why is there a concern about targeting
African Americans?
 During the ’90s, youth smoking rates
increased sharply
 12.6% in 1991
 22.7% in 1997
 80% increase
 After Native Americans, African Americans
have the highest rate of smokers of any
ethnic group in the US
 African American men have the highest rate
of death from lung cancer of any ethnic group
in the US
 81% of African American men who smoke and
contract lung cancer die
 51% of white men who smoke and contract lung
cancer die
 Tobacco companies have clearly targeted African Americans
 Brown & Williamson’s Kool brand
 used a cartoon character, the penguin Willie, that was popular

with black teens

 Has sponsored an annual jazz festival that attracts large black

audiences
 In 1998 cigarette advertisements represented 60% of ad space
in black newspapers
 Following the success of the movie “Malcolm X”, Star Tobacco
Co. introduced a new brand called “X,” packaged in the black,
red and green colors of the black nationalist movement
 Marketed in 20 states before pressure from the community forced

discontinuance of the brand

Geodemographic Segmentation

 A hybrid segmentation scheme

 Based on notion that people who live close to one
another are likely to have similar financial means,
tastes, preferences, lifestyles and consumption
habits
 Market research firms specialize in producing
computer-generated geodemographic market
“clusters” of consumers
 They have clustered the nation’s >250,000
neighborhoods into lifestyle groupings based on
postal zip codes
 Marketers use the cluster data for mail campaigns,
to select retail sites and merchandise mixes, to
locate banks and restaurants, etc.
 “You Are Where You Live”.
Psychographic Segmentation

 Partitioning of the market based on lifestyle

and personality characteristics
 Marketers use it to further refine a target
market
 Its appeal lies in the vivid and practical
profiles of consumer segments that it can
produce
 Accomplished by using AIO inventories
AIO Inventories
 AIO research seeks consumers’ responses to
a large number of statements that measure
 Activities
 Interests
 Opinions
Examples of the use of psychographic
segmentation reflected in marketing
messages
 Kellogg’s targets health-conscious
consumers with brands such as Special K
and Product 19
 Old Spice is targeting the active sports
lifestyle with High Endurance deodorant
Behavioral Segmentation

 Partitioning of the market based on attitudes

toward or reactions to a product and to its
promotional appeals
 Behavioral segmentation can be done on
the basis of:
1. Usage rate
2. Benefits sought from a product
3. Loyalty to a brand or a store
1. Usage Rate
 Differentiates between
 heavy users
 medium users
 light users
 nonusers
 In general, a relatively small number of heavy
users account for a disproportionately large
percentage of product usage
 Targeting those heavy users is a common
marketing strategy
2. Benefit Segmentation
 Marketers constantly attempt to identify the
single most important benefit of their product
that will be the most meaningful to
consumers
 Changing lifestyles play a major role in
determining the product benefits that are
important to consumers and also provide
marketers with opportunities for new products
and services
3. Brand and Store Loyalty
 The tendency of some consumers to
repeatedly select the same brand within a
given product category

 A parallel tendency of some consumers to

repeatedly patronize a particular retail
establishment
 Marketers often try to identify the
characteristics of their brand-loyal customers
so they can target consumers with similar
characteristics in the larger population
 Marketers also target consumers who show
no brand loyalty as a means of penetrating a
larger market
 Marketers reward brand loyalty by offering
special benefits to frequent customers
Choosing Market Segments to Target
 Once an organization has identified its most
promising market segments, it must decide whether
to target one segment or several segments

 Each targeted segment will then receive a specially

designed marketing mix — i.e., a specially tailored
product, price, distribution network and/or
promotional campaign
Market Targeting Strategies

There are three basic types of strategies:

1. Undifferentiated

2. Multisegment (Differentiated)

3. Concentration (Niche)
1. Undifferentiated Strategy

 A strategy that ignores differences between

groups within a market and offers a single
marketing mix to the entire market
 It works when a product is new to the market
and there is minimal or no competition
Advantages and Disadvantages

 Economies in production and marketing

 Vulnerability to competitors offering more

differentiated products and services to market
subsegments
2. Multisegment/Differentiated Strategy

 Targeting two or more segments with

different marketing mixes for each
Advantages and disadvantages

 Minimizes risks, as losses in one segment

can be made up for in others
 Unique product features allow for higher
prices

 Increased costs for differentiated products

and marketing
3. Concentration/Niche Marketing
Strategy
 Focus on one sub-market
 Greater knowledge of customers’ needs
 Economies of scale

 Entry of a strong competitor

 Change in size or tastes of the segment
Positioning

 Deciding how the firm wants the company and

its brands to be perceived and evaluated by
target markets
 Differentiating the product from other products of
the firm or its competition
 Positioning complements and is an integral
part of the company’s segmentation strategy
and selection of target markets
 The same product can be positioned
differently to different market segments
 The result of successful positioning is a
distinctive brand image on which consumers
rely in making product choices
Perceptual Mapping

 A spatial picture of how consumers view

products or brands within a market
 Allows marketers to determine how their
product appears in relation to competitive
brands
 Enables them to see gaps in in positioning of
all brands in the product class to identify
areas in which consumer needs are not being
met
 A visual profile of how consumers perceive a number of pain
relievers on the two dimensions of effectiveness vs. gentleness.

More

Tylenol
Effectiveness

Extra-Strength Tylenol
Bufferin

Nuprin
Anacin Motrin Advil
Bayer
Excedrin
Private Label Aspirin Aleve
Actron Orudis

Less Gentleness to Stomach More

Repositioning

 Marketers may be forced to reposition

products due to competition or a changing
environment
 Modifying an existing brand
 Targeting it to a new market segment
 Emphasizing new product uses and benefits
 Stressing different features with the intention
of boosting sales
Selected Psychographic/Demographic Characteristics
of the PC Magazine Subscriber
Source: 1997 Lifestyles Study, PC Magazine Subscriber Study, Ziff-Davis, Inc., June 1997.

DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent

SEX (BASE 990) USE A COMPUTER 100
Men 86 At home 96
Women 13 At work 89
AGE On vacation/traveling 46
Under 25 5 SELECTED USE OF
25 - 34 18 COMPUTER
35 - 44 29 Word Processing 96
45 - 54 31 Connect to Internet 86
55 - 64 12 E-mail 84
65 or older 5 For work 80
Mean age 44.1 Accounting/record keeping 75
Reference 68
Recreation/games 66
DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent
EDUCATION PORTABLE DEVICES USED
Some college or less 27 WHEN TRAVELING ON
Graduate college 27 BUSINESS
Education beyond Laptop/notebook
college graduate 46 computer 57
EMPLOYMENT STATUS Cellular phone 47
Employed by someone else 68 Beeper or pager 30
Self-employed 21 Personal Digital Assistant/
Other 11 electronic organizer 14
DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent
OCCUPATION/BUSINESS TRAVEL FOR
DEPT. BUSINESS/PLEASURE
Computer related- Business Travel
professional 22 5 or more days per month 31
Senior or corporate 5 or more nights away
management 16 from home per month 17
Engineering-related Pleasure/Vacation Travel
professional 13 15 or more days per year 37
Administrative/ Mean number of days
manufacturing, per year 15.5
accounting, finance, MEMBER OF
purchasing, advertising, FREQUENT FLYER
marketing, sales 26 PROGRAMS 90
Others 23
DEMOGRAPHICS Percent PSYCHOGRAPHICS Percent
INCOME FINANCIAL SERVICES
Under $30,000 7 Currently own
$30,000 - $49,999 15 Mutual funds 48
$50,000 - $74,999 24 Stocks 44
$75,000 - $99,999 19 Bonds 24
$100,000 or more 24 Life insurance/annuities 44
Mean income $87,700 Currently use
PRIMARY RESIDENCE Brokerage services 36
Own 74 On-line investment
Rent 18 services 16
Other 3 Retirement/financial
No answer 5 planning 41
RESPONSE OF SELECTED SELECTED
CONSUMER SPORTS/ACTIVITES
PSYCHOGRAPHIC PLAYED/PARTICIPATED IN
STATEMENTS Percent PAST YEAR Percent
Research before choose Walking/running/jogging 63
brand of new product Exercise/fitness/weight
to buy 41 training 44
Other people ask my opinion Bicycling 7
about which computer Swimming 37
products to buy 41 Golf 27
Usually buy products based Fishing 23
on quality, not price 26 Boating/sailing 19
Prefer products that are Skiing 19
latest in new technology 26 Tennis 14
Among group I am one of
first to try new product 19
HOBBIES/OTHER ACTIVITIES
PARTICIPATED IN Percent
Listen to music 77
Reading 61
Going to movies 60
Surfing the Internet 50
Games-videos on
computer 48
Gardening 32
Going to the theater 32
Cooking 30
Photography 30
Collecting stamps/coins 11
Sewing needlecraft 6